6/29/2009 @ 4:16PM

Collision Course

After nearly a decade of mighty labor and no little expense, he has built a hydrogen-fuel cell car–albeit one so tiny it’s more like a buggy. If the money holds out, he intends to make 50 more of them and then test market the Riversimple Urban Car by leasing it out to residents in a British city center in just three years. “It’s the most exciting opportunity I’ve come across in my life,” enthuses Spowers, an excitable British auto engineer who started his carmaker Riversimple 10 years ago, with the idea of inventing a cheap and environmentally-friendly car. “We’re going to see more change in the next 10 years in the auto industry than in the last 80.”

Unlike Don Quixote, who tilted at a glamorized fictional past, Spowers is jousting with the future. But will that day ever come? Many industry experts dismiss hydrogen fuel cells as far too expensive and impractical — a realization years away, if at all. There are already far bigger players in this game like Honda and Daimler, with lots more staying power than Riversimple.

Yet Spowers, 49, is determined. A former motor racing engineer who quit the noisy smog-choked speedways, he’s convinced that Riversimple can lead the way to more environmentally-friendly driving. He got a degree in engineering science from Oxford University in the late 1970s, an M.B.A. when he was 38 and the idea for fuel cells in the late 1990s from Amory Lovins, chief scientist of the Rocky Mountain Institute. Lovins brought a whole-systems design approach to the vehicle–instead of merely putting a fuel cell in a car, designing a whole new car. “People don’t grasp how specifically cars have been optimized around a combustion engine,” says Spowers, whose own designs became a lower tech version of Lovins’ ideas.

For nine years he tinkered away on a car design and business model, with help from his friends in the motor racing world, Oxford and Cranfield University and the financial support of his wife, an executive at TBWA, the giant ad agency. He and a team of engineers eventually assembled a little black prototype.

Launched earlier this month, the Riversimple Urban Car looks like a Smart car with a pinched front. It takes two passengers, and weighs just 350 kg (770 pounds), compared with the 1,625 kg (3,600 pounds) of the Honda Clarity (the only hydrogen fuel cell car on the road). The car’s 6-kilowatt fuel cell is much tinier than other hydrogen fuel cells ranging from 85 to 100 kilowatts, possible because the car is so small, and beneficial because it drinks less (expensive) hydrogen than other models. With a top speed of 50 miles per hour, Spower’s car is meant for urban driving, never to go on a highway.

How has he gotten even this far? Spowers received 1 million pounds ($1.7 million) from Porsche’s founding Piech family in 2005, thanks to a friendship he struck up with family scion Sebastian Piech a decade ago. Piech says Spowers’ ideas “immediately resonated” when he first heard them, particularly the flexibility of his leasing model. “I already had some ideas in my head on the problems of car distribution, but not the issue of how to solve them.” Piech, who spearheaded the entry of Austrian-based Porsche Holding into China in 2004 , is also executive director of Horizon Fuel Cells, which helped develop Riversimple’s hydrogen fuel cell, and the chairman of bScope Venture Partners, a venture capital group in Shanghai.

BOC, the industrial gas giant, also committed around 100,000 pounds ($166,000) towards the development of Spowers’ car–essentially paying for the refueling costs–and is ready to put more money into the next testing phase. “We’ve looked into the model and we’re happy to continue supporting it on the basis that it is viable,” says Nick Rolfe, director of business development at BOC. The company’s U.S. division is working with Wal-Mart to produce 65 forklift trucks that run on hydrogen, while in Germany it’s partnering with BMW and a small bus company.

Talk about faith in the unproven. Even President Obama has nixed federal funding for hydrogen fuel cells, while Ford and Renault recently halted their own programs. The fuel cell, which has been around for 50 years, generates electricity from hydrogen and oxygen. But there are good economic reasons why you don’t see a lot of hydrogen cars on the road. The fuel cell in the Honda Clarity costs $900,000 to make, according to Spowers; Toyota just announced a model it hopes to have ready by 2012.

But for any car maker, the costs of the production and transportation of hydrogen are huge. Spowers’ original prototype was nearly as expensive, at 500,000 pounds ($830,00) to build, and he estimates the cars in his city test run will run up to 80,000 pounds ($132,000) to produce; that’s 4.8 million pounds ($7.9 million) for the first 50, plus the ten that need to be road tested. BOC wants to find partners to help build its fuelling stations infrastructure, providing real estate for instance. Other methods of hydrogen generation – such as through solar panels or via natural gas – are still many years from coming to market.

The popularity of Smart Cars suggests that there is a market for tiny, two-seater cars that are ECO-friendly. Though expensive, electric cars are durable, closer to market and may satisfy a good deal of this need. Nevertheless, Spowers says there are buyers (or at least lessees) out there, and is looking for a small city council in Britain to launch a test run of 50 of his cars by 2012, partnering with BOC to pay for the fuelling station. Oxford and Peterborough have shown the most interest, apparently motivated by the pressure to show their green cred.

Spowers wants them to share the cost of a single fueling station for the cars with BOC, amounting to around 250,000 pounds ($414,000) to build, and a few thousand pounds a month to maintain. Riversimple wants to lease the cars for 200 pounds ($330) month, and says it will recycle the cars’ parts when they reaches the end of their 15 to 20-year lifespans, meaning the company misses out on recouping costs by re-selling like most car dealers. (The company denies reports that it wants to lock customers into a 20-year lease.)

“The leasing idea seems ideal for local city councils and governmental departments running small fleets,” says Andrew Fullbrook, a senior manager at automotive research group CSM Worldwide. But it also doesn’t make much business sense: even if all 50 cars are leased out in the first year, that only translates into a 12,000 pound ($19,845) initial return on the 4.8 million pounds ($7.9 million) building cost.

Still, Spowers is making full use of his best apostle to raise the 20 million pounds ($33 million) he needs to get him through the road and city tests: Sebastian Piech has been on the road throughout Britain and Europe, seeking investment, though he’s had no firm offers yet. Piech is adamant that Porsche, per se, is not behind Riversimple, but doesn’t rule out it getting involved in the future. Spowers laments, “People just do not realize how critical environmental issues are.” Right now, though, they’re watching their pocketbooks.